France's socialist president is taking a very not socialist approach to fixing the unemployment crisis
While not a shocking statement — striking is seemingly as synonymous with French culture as the stereotypical image of a cigarette-wielding Frenchman in stripes and a beret — these strikes, over a proposal to reform the nation's labour laws, have brought France to a near standstill. In a country where nuclear power production runs 75 percent of the electricity, nearly 16 of the 18 plants are said to be affected by the strikes, the BBC reported. 40 percent of the country's gas stations have almost depleted their fuel supply because of strikes at six of France's eight major oil refineries. Roads and highways and tunnels have been blocked; there are no newspapers on the stands as printers and distributers have ceased production. And the labour unions are showing no sign of backing down. It's a fight over labour laws — and one that isn't remotely new.
As the nation reaches record high unemployment numbers, the French government says it wants to reform labour laws to encourage hiring. The reforms would give employers more leeway to negotiate holidays and special leaves, reduce pay, and fire employees. The theory is that if you make it easier to get rid of an employee you've hired, businesses will be more eager to bring some new ones on. But despite weeks of protest in France's largest city centres, French Prime Minister Manuel Valls, said it is his "responsibility" to make sure the bill is pushed forward. He's even implementing a rarely used constitutional measure that has allowed the text to skip parliamentary debate in the National Assembly and head straight for the Senate. To politicians on the left, the reforms are seen as socialist President François Hollande's attempt to break with the party for more centrist policies. To the protesters on the streets, the reforms are an affront to worker's rights — and to French national identity. But Hollande desperately needs to curb unemployment to sell his term in office as a success, and the structures of the European Union deny him the ability to use most of the kind of tools you would normally expect to see from a left-wing president.
Consequently, Hollande, elected four years ago after running a Bernie Sanders-esque campaign to take down the wealthy and reinforce social safety nets now finds himself staking his political future on a plan to do the opposite. Some problems are inherent to the passing of time: Operating the Metro in Paris no longer requires employing 10 people to check passenger tickets. Like in many advanced economies, the advent of new technology has shifted France's labour market in the last decades. Some jobs have become redundant, and the labour demands in France's robust agricultural industry have decreased. Structural unemployment — where the workers do not have the skills the job market is demanding — has become a major problem. "There are not enough jobs for everybody, and a lot less blue collar jobs," says Philippe Le Corre, a visiting fellow at the Brookings Institute's Centre on the United States and Europe. "That is a fact of life." This has been compounded by a domestic recession in 2008 and Europe's debt crisis in the later part of 2009 and onward. GDP is growing, but too slowly. According to the Financial Times (paywall), GDP will need to grow by at least 1.5 percent per year to accommodate college graduates entering the job market. Recent graduates and people over the age of 54 have been most affected by the unemployment crisis.
In the last decade, France's unemployment rate has hovered around 9 percent — in March it reached above 10 percent. In contrast, the United States' unemployment rate has averaged around 5 percent — where it is now — during that same time period. France's very low inflation rate suggests that more aggressive monetary policy from the European Central Bank could boost job creation, but the French government doesn't control the ECB. Fiscal stimulus — like a large, temporary cut in France's 20 percent consumption tax — could also create jobs, but it would violate the European Union's fiscal rules. Consequently, France's left-wing government feels it has no real option other than rolling back labour market protections. But unlike the United States, France has robust worker's rights laws in place. The 35-hour work week is an institution; employees are entitled to strongly regulate paid leave. Most of all, it is not possible to hire and fire people "at will." Firing workers is expensive, time-consuming, and can only be done with specific reason.
But companies can skirt these rules by hiring "temporary" workers who are less subject to these regulations. The use of temporary workers creates secondary problems. Many younger French people find themselves working on a series of temporary contracts, denied the social standing and economic security of a normal regulated job. And older workers with non-temporary jobs now face a massive disincentive to job-switching, since to hop to a new company they might have to give up their privileged status. "In economies like the US, the churning and the labour flows — in and out of unemployment and employment — is quite fast," says Pascal Marianna, an employment expert with the Organization for Economic Cooperation and Development. "The reforms can have quite an impact smoothening these flows, increasing the flows in and out of employment and making the reallocation of labour more efficient." This year Hollande called the situation an "economic state of emergency," and France's Minister of Economy Emmanuel Macron, a 37-year-old former Wall Street investment banker, said the government has no choice but to push reforms. "We have to keep on pushing and accelerating these reforms because we have a 10 percent unemployment rate and it's too high," Macron told CNBC. "What we need is much more flexibility for the labour markets, because the rigidity is killing opportunities for new jobs."
Other European countries have already started pushing these reforms — Germany implemented similar changes over a decade ago, a controversial move that divided then-Chancellor Gerhard Schroeder's Social Democratic Party but which the current German government regards as having laid the foundation for the country's success in bringing unemployment down to 4.7 percent. "If you compare with countries that implemented reforms years back, it is true that we can say that implementing reforms will provide positive results in France," Marianna said of Germany. "That is the line of reasoning, comparing countries in the eurozone, because we all have the same currency." Historically, implementing these reforms has been more difficult for France, but there's been a continual push this basic direction:
In the 1990s France implemented pension reforms.
In 2006 there was a failed attempt to loosen worker's protections.
In 2010, then-President Nicolas Sarkozy raised the retirement age from 60 to 62.
Last year Macron pushed a law that chipped away at labour market regulations, including allowing more retail stores to stay open on more Sundays.
But all of these reforms were met with protest. Today's protests don't yet compare to those in the 90s, which effectively shut France down, Marianna said, but there continues to be substantial resistance to these kind of deregulatory moves. It's because France is old school, writer Lucy Wadham says in the Guardian: France is a nation built on grand ideals. Ideals of equality, freedom and fraternity. It is not well equipped for such base concepts as economic reality, compromise and negotiation. It does not seem ready either to invite fully its women (or, indeed, its Muslims) into the conversation about what sort of society to build in this climate of constant economic flux. The labour code is built on this notion that everyone must have a statut. Each profession has a specific statut and forms part of a corps de métier, a clear echo of the medieval guild. Clearly this system might not lend itself readily to the kind of professional mobility and reinvention required to succeed in the digital age. And French unions, whose negotiations help set labour practices for most French workers even though actual membership rates are relatively low, continue to be the loudest voices in defence of a cultural heritage of strong labour market protections.
Last year, when France saw labour protests from the country's taxi force in response the Uber's encroaching shared economy, Vox's Zack Beauchamp illuminated the mentality of French unions as always eager to flex political muscle: Because French unions get so much of their clout not from their membership but from favourable laws, which could theoretically be repealed at any time, the unions are paranoid. They're more willing to fight any policy they don't like now — because they might not be able to fight in the future. But the protests also represent a backlash against a government that is widely mistrusted. Voters brought Hollande into office to replace Sarkozy expecting to find an alternative to the push for market-oriented reforms, but he hasn't found a feasible alternative strategy for job creation. "There is resentment against a party and a president who is basically doing the exact opposite," Le Corre said.